Q1
First and foremost, before we delve into the importance of monitoring the 6 environmental forces, it is important to understand what Macroenvironmental Forces actually are. A Macroenvironment is one or a combination of factors that change an organisation, indirectly. According to Kotler & Keller Marketing Management, 15th Global Ed. (2016), there are a total of six environmental forces, Demographic, Economic, Socio-Cultural, Technological, and Political-Legal.
Image 1: Forces in the Macro-Environment (Source: https://marketing-insider.eu/macro-environment/)
Demographic forces relate to the characteristics of the human population such as the population growth rate, age distribution, gender, profession and others. As customers are the driving force behind the development of markets, it is important to identify the attributes that make up the target audience in order to effectively reach out to them and to address their needs. However, due to the dynamic nature of demographic forces, marketers are required to keep their eyes on trends such as the world population growth, changing age structure, changing family structures and geographic shifts in populations, in order to alter their strategies accordingly.
Economic forces comprise of elements that influence the consumer buying power and their spending habits. Prior to investing in a product, companies would need to examine the likelihood of purchase among their target consumers as well as the amount that they are willing to spend on the product. These, in turn, would depend on factors such as GDP, GDP real growth rate, GNI, Import Duty rate and sales tax/VAT, Unemployment, Inflation, Disposable personal income, and Spending Patterns.
Socio-Cultural Forces include factors like customs, lifestyles and values that shape the society. For companies attempting to penetrate foreign markets, it is important for them to study the respective countries’ values, preferences and behaviours before shaping their marketing campaign. This is to prevent failure in product or service sustainability due to the lack of cultural understanding and sensitivity.
In terms of education and language, businesses should also bear in mind the different levels of education the society has and the common language is spoken. Should the majority of the community have completed their post-tertiary education, they may consider to insert more details in their advertising and use more sophisticated words targeted to influence their decision.
Technological Forces are the fourth of the six environmental forces. With fast-changing times marked by rapid development and new emerging technologies, technological forces are arguably said to play the greatest impact on the market environment today. Hence, businesses have to stay up-to-date by keeping a close watch on the technological environment; otherwise, they might miss the opportunity to leverage on the latest technological innovations that would enable them to disrupt or tap on new markets.
With the advancements of technology, businesses are now privy to data collection and analysis, which would allow them to develop better business strategies. The collection of data from consumers allows organisations to track and be updated with the current trends and demands. The improved process of data collection and analytics strategically allows. Hence, if businesses were able to focus their attention on the needs of the consumer and provide a solution when there is a demand, it is the key to the success of the business.
Ecological forces refer to the natural resources utilised by marketers to carry out their marketing activities. Over the years, governmental concerns about air and water pollution have grown tremendously. At the same time, societies have grown to be increasingly involved in environmental welfare and sustainability. Hence, it is vital for marketers to keep track of the relevant ecological trends, such as the availability of alternative renewable energy sources in order to introduce products or services that comply with the standards of an eco-friendly business.
Lastly, political forces include the law, government agencies and other interest groups that are responsible for implementing business legislation. Prior to penetrating the foreign market, marketers have the responsibility to conduct a thorough research on the various rules, regulations and policies that guide business activities within the country or state. Based on the aforementioned legal factors, businesses might be required to re-strategise their plans before entering the new market.
For the case study of Deliveroo, we have chosen to delve deeper into Demographic, Socio-Cultural and Technological Forces.
Demographic Force
Demographic Force is the study of the human population through the variables of size, age, gender, occupation, social class and generation cohort. It is considered one of the most important forces because people are the reason for the existence of a business. Businesses need to identify the changes in demographics to ensure marketing strategies remain relevant to the population. In context to Deliveroo, the useful variables can be age, generation cohort, income and family life cycle.
Image 2: Statistics about the use of food delivery services in Singapore (Source: https://www.statista.com/outlook/374/124/online-food-delivery/singapore)
According to the statistics about the use of food delivery services in Singapore (Image 2), there is a steady increase in needs of restaurant-to-consumer delivery service throughout the years since 2016. The figure has increased from 0.7m to 1.1m in this year and is predicted to reach 2 million users by 2022.
Image 3: Statistics about the use of food delivery services in Singapore for users by age (Source: https://www.statista.com/outlook/374/124/online-food-delivery/singapore#market-age)
According to the Age chart, the highest users of food delivery services comes from the Gen Y cohort (25-34 years old). The second highest user group is Gen X, which ranges from 35-44 years of age. They are followed closely by Gen Z (18-24 years), and finally, the Baby Boomers (55-64 years old) have shown least interest in the use of such services (Image 3).
Image 4: Statistics about the use of food delivery services in Singapore for users by income (Source: https://www.statista.com/outlook/374/124/online-food-delivery/singapore#market-age)
The income chart reveals that high-income earners are also more likely to use food delivery services. Lower income earners are more likely to take the initiative of purchasing their own meals (Image 4).
Referencing a Today article, such services are also more inclined towards singles or married couples without children. For instance, one of the interviewees, Ms Angie, uses the service to order food for her husband and herself for up to five times a week with a spend of between S$18 to S$30 each time (Angela Teng & Siau Ming En, 2018).
Image 5: Age profile of the citizen population. (Source: https://www.population.sg/population-trends/demographics)
Referring to the age profile of citizen population age pyramid of Singapore, most of the population in the year 2016 were made up of the generation cohort of X, Y and Z. By 2060, it is projected that these population will move up in the chart and cause an effect of inverted pyramid (Image 5). This means that the users of such food delivery service like Deliveroo will also be likely to form an aged group of users. This trend could potentially impact the growth of business like Deliveroo because aged population have different food preference such as eating healthily. The current users from Gen X will most likely become retirees and this group of population may also face a higher needs of spending on healthcare. As suggested by William A Haseltine (Forbes, 2018), people are more likely to suffer from chronic diseases as they age. These chronic diseases will incur increased costs within the household. This increases the likelihood that an aged population would use less of such services as they are not earning as much as before.
Image 6: Singapore’s total population growth 2007 – 2017. (Source: https://www.population.sg/population-trends/demographics)
The second trend that could impact the growth of Deliveroo is related to the size of the market. As shown in the graph above, Singapore has been experiencing a decline or flat growth in population. Currently, the four main companies that provide restaurant-to-consumer food delivery service in Singapore are FoodPanda, Deliveroo, Grabfood and Honestbee. There are also many restaurants which provide their own delivery services such as Pizza Hut and McDonalds. With a population of just 5.61 million, there are too many game players in this relatively small population size. With the competitive market, people start to look at price and promotion, increasing the need to stay desirable to customers. The trend of declining populations suggests that companies are fighting for the same pool of customers which results in a competition of price war.
Socio-Cultural Forces
Socio-Cultural Forces are formed by people who are part of a society and cultural group that shapes their beliefs and values. It also refers to how the values and perception of a culture or society affect the business. Socio-cultural forces usually influence the welfare of a business firm in the long-run. With ever-changing society, new demands are created in short time spans and old ones are lost in due course. Thus, necessary adjustments are required to be made in the marketing plans to meet the needs and desires of the target market.
One of the trends that would impact the growth of Deliveroo is the raised sensitivity on the advertisement (Leigh, 2018). Advertising often seeks to be trendsetting, and to do this, Deliveroo cannot lose track of the pulse of the societies in which they engage in business. Changes in morals, values and fashion must all be considered when creating outward facing advertisements. In our multi-cultural nation, it is important for Deliveroo to be observant of the societies in which they engage business with. Deliveroo offers a wide variety of different food, from Chinese, Muslim, Indian, to Western cuisines. This effort successfully breaks down the barrier to a multi-cultural nation.
Another trend that could potentially impact the growth of Deliveroo is the food culture in Singapore. As a multi-racial country, Singapore celebrates festivals of multiple ethnicities throughout the year. Residents of Singapore value harmony and respect the differences of each culture. When families come together during such festivities, they may find it exhausting to have to prepare large amounts of food to cater to family and friends visiting and dread the long queues at restaurants. Many young families these days do not know how to cook as well and this caused the new parents to heavily reliant on delivery service, the younger generation of kids also are picky with their food choices and according to NUH x Abbott survey, it shows that nearly half of Singaporean parents say their children are picky eaters (National University Hospital, 2012).
Technological Forces
Technology has evolved immensely over the last century. Humanity has come a long way from typewriters and rotary dial phones. Even today, technology is constantly on the move, and new innovations and ideas are being birthed on a day-to-day basis. In order to keep up with the times, Deliveroo must be able to adapt and evolve along with it, at the same light-footed pace.
The birth of the internet and the many social media platforms it hosts is one huge factor that affects possible consumers of any product or service. While in the past, people were heavily reliant on friends’ and family’s Word of Mouth, today, we are heavily reliant on the internet. Searches for reviews are common before visiting a fine dining restaurant or booking a place to stay the night on a trip. In today’s state of technology, a whole new world of information is ready for the user’s access, right at his fingertips. Organisations have to be increasingly cautious as to how they are portrayed online as it can make or break their brand.
Technological Change brings about certain trends that could impact the growth of businesses. One such trend is the Accelerating Pace of Change. Change happens so quickly that in many cases if the organisation does not adapt along with it, they face the possibility of completely being eradicated. Take Sony Ericsson or Motorola for example. What was once the most sought-after cell phone in the mid-2000s, has now gone to dust.
Deliveroo is an online food delivery company that does take-away deliveries and delivers it to your home or another desired location. As the service provider runs its’ business mainly via an app, it is inevitable that technology plays a big part in Deliveroo’s survival. In the question, it was stated that “Deliveroo has updated its app with an alert system that lets both the restaurant partner and Deliveroo rider know when an order is ready for collection” This app improvement will allow better seamlessness in service provision and further cut down delivery time. It is such improvements like this that allow a business to keep up with the times and ahead of their competitors.
Another trend is that there are Unlimited Opportunities for Innovation. In light of this, Deliveroo must constantly be forward-thinking and plan ahead of their competitors in order to stay ahead of the times. Deliveroo’s birth of the Deliveroo Editions concept is interesting and may appeal to working-class adults, who seek quick meals and variety. The ‘Click and Collect’ option also allows customers to save on the delivery fees, and as such may further appeal to those looking to squeeze the best bang for their buck. Thus far, Deliveroo has done quite a stellar job with their business, including the use of reviews and feedback to constantly stay on the ball and deliver great service. However, one should never be complacent, and always be open to new ideas / upcoming trends. In Craig Charles words, “It’s evolve or die, really, you have to evolve, you have to move on otherwise it just becomes stagnant.”
Q2
5 Levels of Customer-Value Hierarchy
The Five Levels of Customer-Value Hierarchy can be analysed through overlaying circles from inner-most (core) to outer-most, as shown in the diagram below. Each additional layer represents a customer value add.
Image 7: Customer-Value Hierarchy. (Source: https://www.cgma.org/resources/tools/cost-transformation-model/kotlers-five-product-level-model.html)
The first component of the Customer-Value Hierarchy is Core Benefit. This refers to the original intention of the service or product, the service or benefit that the customer is really buying. Deliveroo provides a service and the basic is providing food delivering. The customer orders food, and food should arrive.
The second component of the Customer-Value Hierarchy is Generic Product. It refers to the qualities of the service to function. For instance, Deliveroo’s basic product will be providing third-party restaurant food delivery to customer’s doorstep. This means getting the food from the restaurant to paying customer.
The third component of the Customer-Value Hierarchy is Expected Product. This refers to a set of qualities that a customer generally expects upon normal circumstances of using the service. Customers of Deliveroo will likely expect hot and fresh food to be delivered in good packaging, speedily and timely.
The fourth component of the Customer-Value Hierarchy is the Augmented Product. This is where additional features and other qualities related to the service can differentiate the business from its competitors. Deliveroo’s differentiation is the “click and collect” service option where it allows its’ customers the option to pick up their orders from the newly opened central kitchen in Lavender, sans delivery charge. This option benefits customers who may be passing by the central kitchen in Lavender, perhaps while on the way home, to pick up their food and save on the delivery charge. While it still requires a physical collection by the customer, this value-add eradicates the notion of visiting the food outlet itself, which may be located in a less central area.
The final component of the Customer-Value Hierarchy is Potential Product. This is where possible augmentations and remodelling of services are introduced to ensure the business remains in competitiveness and gains future customer loyalty. One such way to ensure future customer loyalty is the introduction of improved products that evolve along with the times. One such method is for Deliveroo to introduce satellite kitchens(James Raven, 2018) to further keep up with changing food trends and serve heartland customers better.
Product Differentiation
In the current market, there are many similar products that serve the same purpose and sport the same features. This results in an increased need for companies to customise their products to stay relevant and abreast of their competition.
Today, Deliveroo has a referral credit programme, where one can receive credit points for introducing the app to their friends and family. This is a widely used method by many of their competitors and does little to set Deliveroo apart. A suggested method of differentiation for Deliveroo is the introduction of a Loyalty Programme where customers are able to receive credits or a percentage rebate after every purchase. This drives customers to return and attempt to use up the accumulated credit. This creates a spending cycle which benefits the business.
Another suggestion for product differentiation is Filters. Currently, Deliveroo only allows the customer to filter their order choices by choosing either halal or vegetarian. In today’s society, special diets like Gluten-Free and Pescatarian Diets are on the rise. By accommodating a customer’s demands without the need to input special requests, it improves the user experience and in turn boosts the likelihood of a return purchase.
While the world makes its shift towards going cashless, Singapore is in fact rather resistant, with 90% of Singaporeans still preferring to use cash (Today Paper, Tan Weizhen, 30 Aug 2017). In a bid to promote fuss-free dealings for their riders, Deliveroo deals within the online payment portal and does not accept cash payments. This shuts off the service to all potential users who do not use online payments, such as many of the younger users who do not own credit or debit cards, and the older users who fumble with electronic devices and the more complex functions such as online payments.
A final recommendation would be for Deliveroo to implement a Meal Recommendation List based on the customer’s last order / frequent haunts. Singaporeans are generally indecisive and have a hard time making a choice on what to eat. The addition of such an algorithm would enable Deliveroo to go beyond their competitors and produce an augmented product which sets them apart.
Service Differentiation
In today’s world, where competition is strife, it is important to stand out in order for a business to succeed. One of the ways to do so is Quality Service Differentiation. When the product/service offered exceeds the customer’s expectations, the WOW Factor is what sets the organisation apart from any other brand.
In Singapore’s Food Delivery scene, Deliveroo is no short of competitors. Even with the market exit of UberEats, Deliveroo is joined by FoodPanda, GrabFood, and Honestbee. These business fight for the king’s share of the market, and offer pretty much the same service. Many factors come into play that makes an app a preferred choice. One of these factors is the Ease of Ordering.
Long gone are the days of dialling 6235 3535 for Pizza Hut Delivery and being placed on hold to listen to a pre-recorded message while the system connects you to an unenthusiastic pizza boy who takes your order. These days, we are all heavily reliant on smartphone apps to place orders in a few taps. The User Experience and User Interface (UX/UI) of any app are critical when it comes to ensuring a fuss-free order placement and returning customers. A user-friendly application is speedy, free of bugs or errors and easy to use. In today’s busy world, nobody wants to waste their time on a website that doesn’t load or a non-responsive mobile app. If the app doesn’t work, the customer will happily take their money elsewhere.
Image 8: Key Components Model of UX/UI.
(Source: https://medium.com/@thinkwik/do-you-know-the-importance-of-ui-ux-development-773eae38436e)
The 5 Key Components of UX/UI Design are Usability, Information Architecture, Interaction Design, Wireframing and Visual Design.
Having a good UX/UI will not only enable Deliveroo to gain customer’s confidence but will also boost good word of mouth amongst family and friends, further bumping the app outreach. For first time users, the UX/UI makes a long-lasting impression that can make or break the loyalty to the brand.
Another service differentiation that Deliveroo could adopt is the Standards of their Delivery Service. In the sphere of food delivery services, every app does the same job, which is to deliver a meal. Deliveroo needs to set itself apart from their competitors by offering a Service Guarantee.
Referencing an article from Today Papers written by Angela Teng on 7 Jan 2018, she states that most of Deliveroo’s riders are under 30 years old and consist of students, part-timers, and professional athletes. This evidences Deliveroo’s efforts in ensuring timely deliveries and should be upkept.
Deliveroo can further improve their delivery services by assuring customers that they will be able to deliver the food within a certain time frame. If they are unable to deliver within that time frame, customers will be compensated, perhaps with a discount on their next purchase or free delivery on their next order. By setting a time limit, it assures the customer that the food delivered will still be hot and creates the lasting impression that the company is able to provide quick and reliable deliveries. This builds customer confidence and creates the ground for returning customers. At the same time, it also boosts efficiency and speed of deliveries and allows Deliveroo to increase the total amount of orders taken in on a daily basis, hence increasing business profit margin.
To sum it all, the growth of the business will be greatly affected by the macroenvironment forces if these forces were not taken into consideration during the development stage of their strategies. Different organisations and industries have different needs and in the case of Deliveroo specifically, trends such as Acceleration Pace of Change and business differentiations can definitely hinder their growth if they do not constantly keep themselves up to date with the latest changes in technology.
Total Word Count: 3,475 words
References for Question 1:
Kotler, P. and Keller, K. (2016). Marketing management. 15th ed.
Claessens, M. (2018). The Macro Environment – Six Forces (DESTEP). [online] Marketing-Insider. Available at: https://marketing-insider.eu/macro-environment/ [Accessed 28 Sep. 2018].
Diva-portal.org. (2018). [online] Available at: http://www.diva-portal.org/smash/get/diva2:832245/FULLTEXT01.pdf [Accessed 28 Sep. 2018].
Forbes.com. (2018). [online] Available at: https://www.forbes.com/sites/williamhaseltine/2018/04/02/aging-populations-will-challenge-healthcare-systems-all-over-the-world/#3069dd1b2cc3 [Accessed 28 Sep. 2018].
Frue, K. (2018). What is Macro Environment Analysis?. [online] PESTLE Analysis. Available at: http://pestleanalysis.com/what-is-macro-environment-analysis/ [Accessed 27 Sep. 2018].
MoneySmart.sg. (2018). Deliveroo vs Foodpanda vs GrabFood vs Honestbee – Which Food Delivery Service in Singapore is Best?. [online] Available at: https://blog.moneysmart.sg/dining/deliveroo-foodpanda-grabfood-honestbee/ [Accessed 25 Sep. 2018].
Population.sg. (2018). Demographics. [online] Available at: https://www.population.sg/population-trends/demographics [Accessed 29 Sep. 2018].
Population.sg. (2018). Jobs & Economy. [online] Available at: https://www.population.sg/population-trends/jobs-economy [Accessed 01 Oct. 2018].
Population.sg. (2018). The ageing crisis that isn’t. [online] Available at: https://www.population.sg/articles/the-ageing-crisis-that-isnt [Accessed 01 Oct. 2018].
Smallbusiness.chron.com. (2018). Macroenvironmental Forces Affecting Marketing. [online] Available at: https://smallbusiness.chron.com/macroenvironmental-forces-affecting-marketing-71632.html [Accessed 01 Oct. 2018].
Statista. (2018). Online Food Delivery – Singapore | Statista Market Forecast. [online] Available at: https://www.statista.com/outlook/374/124/online-food-delivery/singapore [Accessed 01 Oct. 2018].
The Straits Times. (2018). China’s next debt bomb is an ageing population. [online] Available at: https://www.straitstimes.com/asia/east-asia/chinas-next-debt-bomb-is-an-ageing-population [Accessed 03 Oct. 2018].
TODAYonline. (2018). Food delivery companies vying for a slice of the pie. [online] Available at: https://www.todayonline.com/singapore/food-delivery-companies-vying-slice-pie [Accessed 02 Oct. 2018].
TODAYonline. (2018). The Big Read: When the world (of food) is at your fingertips. [online] Available at: https://www.todayonline.com/singapore/big-read-when-world-food-your-fingertips [Accessed 02 Oct. 2018].
Wei, N. (2018). Bittersweet taste of food delivery apps. [online] The Business Times. Available at: https://www.businesstimes.com.sg/consumer/bittersweet-taste-of-food-delivery-apps [Accessed 04 Oct. 2018].
Smallbusiness.chron.com. (2018). Sociocultural Factors That Affect Marketing. [online] Available at: https://smallbusiness.chron.com/sociocultural-factors-affect-marketing-56914.html [Accessed 04 Oct. 2018].
Richards, Leigh. (2018, June 28). The Effects of Socio-Culture on Business. Small Business – Chron.com. Retrieved from http://smallbusiness.chron.com/effects-socioculture-business-10602.html [Accessed 02 Oct. 2018].
UKEssays. (2018). The Influence Of Socio Cultural Environment Marketing Essay. [online] Available at: https://www.ukessays.com/essays/marketing/the-influence-of-socio-cultural-environment-marketing-essay.php [Accessed 02 Oct. 2018].
References for Question 2:
Property Week. (2018). Satellite kitchens send delivery food rocketing. [online] Available at: https://www.propertyweek.com/comment/satellite-kitchens-send-delivery-food-rocketing/5094936.article [Accessed 03 Oct. 2018].
Bhasin, H. (2018). Service differentiation – 7 ways to Differentiate services from Competitors. [online] Marketing91. Available at: https://www.marketing91.com/service-differentiation/ [Accessed 05 Oct. 2018].
CGMA. (2018). Kotlers Five Product Level Model. [online] Available at: https://www.cgma.org/resources/tools/cost-transformation-model/kotlers-five-product-level-model.html [Accessed 04 Oct. 2018].
Kotler, P. and Keller, K. (2016). Marketing management. 15th ed.
MoneySmart.sg. (2018). Deliveroo vs Foodpanda vs GrabFood vs Honestbee – Which Food Delivery Service in Singapore is Best?. [online] Available at: https://blog.moneysmart.sg/dining/deliveroo-foodpanda-grabfood-honestbee/ [Accessed 07 Oct. 2018].
Slideshare.net. (2018). Product & service differentiation. [online] Available at: https://www.slideshare.net/visheshsrivastava1/product-service-differentiation [Accessed 08 Oct. 2018].
TODAYonline. (2018). 90% of Singaporeans prefer cash payments: PayPal. [online] Available at: https://www.todayonline.com/singapore/90-singaporeans-prefer-cash-payments-paypal [Accessed 07 Oct. 2018].
ToolsHero. (2018). Five Product Levels by Philip Kotler including examples | ToolsHero. [online] Available at: https://www.toolshero.com/marketing/five-product-levels-kotler/ [Accessed 09 Oct. 2018].
Medium. (2018). Do you know the Importance of UI/UX Development? – Thinkwik – Medium. [online] Available at: https://medium.com/@thinkwik/do-you-know-the-importance-of-ui-ux-development-773eae38436e [Accessed 09 Oct. 2018].
Nuh.com.sg. (2018). [online] Available at: https://www.nuh.com.sg/wbn/slot/u3007/Patients%20and%20Visitors/Newsroom/Media%20Releases/2012/PRESS%20RELEASE_Picky%20Eating%20Survey%20Results.pdf [Accessed 10 Oct. 2018].